Business Plan
University in San Francisco
NUR 764
Sherrill Sorensen, MHL, DNP(c) sherrillsorensen@gmail.com
307-431-6144
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Table of Contents
1.
Business Model…………………………………………………………………………………………………3
1.1.
Product/Service mix
1.2.
Nature of revenue and pricing
1.3.
Recurring revenue
1.4.
Timing of Revenue……………………………………………………………………………………4
2.
Market Analysis
2.1.
Target Market
2.2.
Customer demographics
2.3.
Competitive analysis
2.4.
Price/margin/volume profile………………………………………………………………….5
3.
Financial Plans
3.1.
Projected income statement
3.2.
Revenue growth…………………………………………………………………………………….6
3.3.
Financing
3.4.
Equity……………………………………………………………………………………………………..7
3.5.
Company valuation
3.6.
Shareholder worth
4.
Major Milestones with Funding
4.1.
Development schedule
4.2.
Budget for first year………………………………………………………………………………8
5.
Pro Forma Financial Projections
5.1.
Revenue projection
5.2.
Break even analysis
5.3.
Cash flow analysis
5.4.
Operating statement
5.5.
Balance sheet
6.
Evaluation Plan……………………………………………………………………………………………9
7.
Appendix……………………………………………………………………………………………………..11
7.1.
Pro Forma Financial Statements
7.2.
Income Statement
7.3.
Balance Sheet
7.4.
Cash Flow Statement
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Virtual Care Companion
1.1.
Product/ service mix
The Virtual Care Companion operates over the internet to connect patients with families and loved ones by utilizing an interactive webcam. Our initial service offering is for unplanned short term hospital stays for emergencies or acute care. We are not a webcam distributor – this product is purchased by client hospitals as a hardware requirement to utilize our services.
When a patient is admitted to the hospital without friends or family, the hospital offers our three service levels. The first level is for webcam access only, the second level adds the assignment of a virtual nurse for patient care monitoring, and the third level adds live chat with the virtual nurse.
1.2 Nature of revenue and pricing
Our revenue includes a one-time registration and setup fee when the patient is admitted to the hospital and activates the service, followed by a daily service fee billed in advance in 24 hour increments. At the beginning of every day that the patient stays in the hospital an additional day of service will be charged.
We have no direct competition offering the same service for pricing comparison. There are no virtual nurse services currently available in the market. Similarities exist with other companies that offer actual companionship or communication links with friends and family over the internet or mobile networks:
Name
In-room webcam
Virtual Care Companion Yes
Care-View
Hospital Companions
Watchful Webcam
No One Dies Alone
Yes
No
Yes
No patient website
Yes
No
Yes
Yes
No twoway
Yes
Yes
No
No
No virtual nurse yes no no no no other device no yes no no no
Pricing
$25/day
$13/day
$45/hr
$75/month
Volunteer
Skype/mobile devices No No Yes no yes no cost
Care-View (CRVW.OB) is the closest competitor in offering a hospital based solutions for connecting patients with loved ones through the internet, but this is a communications company that is building hospital networks similar to hotel cable networks and requires significant capital investment. Virtual Care Companion operates with the existing wireless hospital network.
1.3 Recurring revenue
This is a short term “subscription” on a day by day basis for the length of the hospital stay.
However, if patients and families request to continue the service from home or from another healthcare facility, since our service is all online we will negotiate longer term contracts. The recurring nature of the revenue is due to the hospital continually receiving new patients and offering this service as an enhancement to their ongoing patient satisfaction initiatives.
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1.4 Timing of revenue
Our service is paid in advance by credit card on our website. The initial registration requires payment to activate the webcam with usernames and passwords for the first 24 hours.
Additional increments of 24 hours are automatically charged at the beginning of each new period.
2.1.
Target Market
Our target market initially is driven by the need to have enough patients to provide an attractive payout for our virtual nurses and local business managers, while maintaining a low price per patient. With that in mind we target large hospitals in large metropolitan areas to initiate our service and establish our base of qualified virtual nurses. As our business becomes established in densely populated areas with continuous patients in need of our services, we will be able to marginally extend our service to smaller community hospitals and rural healthcare facilities that typically operate with much lower occupancy and census levels.
2.2. Customer Demographics
We view our customers as hospitals in need of our service to help them provide better care, resulting in better patient outcomes and satisfaction scores. Although the idea for our service is derived from personal observations of patients alone in hospitals, our service demographic extends to any patient or interested parties that would like to be connected during any hospital stay. Those who have planned to come to the hospital are likely to have the time to prepare by contacting companions and bringing their own electronic or mobile devices for communication.
Those who have not planned and are going to the hospital in an emergency situation will be more likely to arrive unprepared and without companions, and will be more likely to request our service. The following summary provides an indication of our potential demographic reported in the National Hospital Ambulatory Medical Care Survey for 2008:



Number of emergency room visits: 123.8 million
Number of injury-related visits: 42.4 million
Percent of visits resulting in hospital admission: 13% (16 million patients annually)
Our focus is on the percent of visits resulting in hospital admission, 13%, which indicates approximately 16 million patients with unplanned stays annually. Based on an average 3 day stay, there are over 100 thousand patients in this category at any given time. The main reason that family and friends are not with them is precisely because this was an unplanned event and it takes time for others to be notified and begin to communicate and arrange travel. We provide hospitals with the means to respond to the needs of these patients.
2.3.
Competitive Analysis
Currently our competition is fragmented among providers of webcams, mobile devices, internet communication services, personal companion services, volunteer aides, and hospital communication and information network companies. There is no virtual nurse service and few internet communication providers specific to the healthcare industry in compliance with current healthcare privacy regulations. An individual can piece together their own arrangement for these services from separate sources. We offer a savings in time and money for the hospital and for the patients and their families in stepping up and offering this service when it is needed –
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REVENUE when the patient arrives unexpectedly at the hospital and the patient or their loved ones are not prepared to make such arrangements.
2.4.
Price/Margin/Volume Profile
Our pricing is based on what we expect to pay out to virtual nurses and local managers, in order to provide them with an income in line with market employment opportunities. Most of the operation is based in home offices so there is very little overhead expense to be covered by contract nurses and managers.
Considering the high price of a private duty nurse or hospital companion at $45/hr, the price of our service at $15 to $45/day is very low at less than $2/hr per patient. We pay out 90% of revenues and retain 10% for central administration and partner distribution. For the virtual nurse, compensation based on service volume at full capacity of between 12 and 16 patients pays out at $14 to $20 hourly. The shift schedules are 4 hours each, so virtual nurses working at home are making $50 to $75 daily and can work 1 to 7 shifts per week. The net profit retained by central administration is relatively low on a per patient basis but becomes significant through growth and high volumes to be achieved in the first year of operation.
3.1.
Projected Income Statement
Year 1 – Q1 Year 1 – Q2 Year 1 – Q3 Year 1 – Q4 year 2 year 3 registration fees $25/pt
Virtual View $10/day
$ 21,600 $ 32,400 $ 43,200 $ 54,000 $ 86,400 $ 172,800
$ 29,455 $ 44,182 $ 58,909 $ 73,636 $ 78,545 $ 157,091
Virtual Care
Virtual Response
Total Revenue
$35/day
$45/day
$ 75,600 $ 113,400 $ 151,200 $ 189,000 $ 302,400 $ 604,800
$ 97,200 $ 145,800 $ 194,400 $ 243,000 $ 388,800 $ 777,600
PAYOUT
Contract revenue payout
$ 223,855 $ 335,782 $ 447,709 $ 559,636 $ 856,145 $ 1,712,291
$ -
$ -
$ -
$ -
$
(201,469)
$
(302,204)
$
(402,938)
$
(503,673)
$ (770,531) $ (1,541,062)
$ - $ -
$ 22,385 $ 33,578 $ 44,771 $ 55,964 $ 85,615 $ 171,229 NET REVENUE
Annualized Net Revenue $ 268,625 $ 402,938 $ 537,251 $ 671,564 $ 1,027,375 $ 2,054,749
Assumptions:
Patients virtual nurses
Year 1 – Q1
108
54
Year 1 – Q2
216
108
Year 1 – Q3
324
162
Year 1 – Q4
432
216
Year 2
864
432
Year 3
1728
864
Payout rate
Patients/nurse
Operation centers
4 hr shifts
Nurses/shift
Ave pay/nurse/day
Ave payout/hr
Ave mgr payout/mo
90%
12
3 locations
6 shifts/24 hrs
1 2 shifts/8 hrs
$ (54) $ (54) $ (54) $ (54) $ (54)
$ (13.38) $ (13.38) $ (13.38) $ (13.38) $ (13.38)
$ (1,070) $ (2,140) $ (3,211) $ (4,281) $ (5,351)
$ (54)
$ (13.38)
$ (6,421)
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3.2.
Revenue Growth
The business will begin operations with a local business manager/virtual nurse in each of three time zones. Each zone will be assigned an 8 hour block, staffed by the local business manager themselves initially and then recruiting and managing contracted nurses as needed in sufficient number to monitor 12 patients per nurse. This means that there will be at least three nurses, one in each of the 8 hour periods assigned to each time zone, to provide continuous monitoring of 12 patients. As the business grows, the 8 hour periods will be broken down into 4 hour shifts, so instead of 3 nurses for 8 hours each, we will assign 6 nurses at 4 hours each in order to monitor 12 patients. The local business manager will have the option of continuing to work as a virtual nurse for some of the shifts while adding other virtual nurses to handle the increasing patient load.
From the outset, revenues will be variable and depend on the number of patients being monitored. Our objective is to add an average 12 patients being monitored daily in each time zone each month, which is an overall increase of 36 patients per month. At this rate of growth, revenues are projected to grow to over $100k per month in the first 90 days, followed by consecutive quarters increasing by an additional $100k in monthly revenues every 90 days, increasing to $428k monthly for a total of $2.8 million in gross revenue for first year of operation.
There is no fixed overhead since local business managers will be treated as partners and the virtual nurse pool will all be independent contractors, with no fixed base salary or benefits.
Revenue will be shared with at least 90% paid out to the local business managers and virtual nurses. The net revenue of approximately $280k will be distributed to the managing partners of the business, who will perform the central administrative functions for the group.
From startup the first sales revenues will occur within 90 days upon placement and activation of the interactive webcams in patient rooms. Operations will be profitable in the first quarter since there are no fixed costs or obligations for the business and revenue payout will always be less than total revenues. During the first year of operations, the costs of central administrative functions will be contributed by the individual partners in their area of expertise, and reimbursed as operating expenses before distribution of any taxable net revenues.
Ongoing central administrative functions include the processing of operating revenues, management of the contractor payroll, preparation and execution of legal contracts with customer hospitals and other healthcare organizations, development and delivery of training materials, development and maintenance of the company website, and development of marketing materials and advertising.
3.3.
Financing
Essentially, the startup of operations is self- financed by the managing partners and the local business managers. Each of the five partners will contribute $5k for a total startup working capital of $25k to cover the costs of website and marketing materials.
In addition to the operating costs, the company will become a reseller of webcams and will invest in an inventory of 60 units and security locks to be maintained for immediate placement of units in new facilities and replacement of defective units in existing facilities. The cost of this
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inventory at $135/unit is approximately $10k on net 30 day terms, effectively financed by the manufacturer.
After 12 months of operations, the business will be seeking an unsecured bank line of credit of
$100k for general working capital requirements. This will allow the company to take advantage of additional discounts on webcam inventory for early payment, and supplement marketing costs as the business expands in additional territories.
3.4.
Equity
The startup equity in the business is the $25k contributed by the managing partners. The only liabilities will be short term accrued payables for inventory, website and marketing services, and current revenues to be distributed. There are no company owned facilities or equipment and no corresponding long term obligations.
3.5.
Company valuation
Based on projected cashflows, by the end of the fifth year of operation the business will generate net revenue of $1.5 million with an average 1700 patients monitored daily. As the business grows and cash flow is sufficient to pay for central administrative functions, the managing partners will replace themselves with outside legal, accounting, network, training, compliance and marketing services at approximate cost of $300k. The net cash flow of $1.2 million would indicate a valuation of between $15 to $20 million based on investor cap rates of between 5% to 8%.
3.6.
Shareholder worth
If we take into account the company valuation, shareholder worth will grow from the initial
$25k invested by the partners to approximately $15 million in five years of operation.
4.1.
Development Schedule
4.1.1.
First Quarter:
Provide training to three local business managers in the setup and operation of the webcam
Provide marketing literature and scripts to local business managers
Execute service contracts with local hospital customers in each market
Place 12-15 webcams and provide service menu cards to hospital customers in each market
Establish company website with links for online activation and payment
Recruit and train 30 virtual nurses per month in each market time zone
4.1.2 Second Quarter:
Begin marketing to community hospitals and doctors in each market
Introduce website enhancements with patient web pages
4.1.3 Third Quarter:
Begin affiliate marketing with other webcam providers
Begin affiliate marketing with local retailers
Introduce online gift store
4.1.4 Fourth Quarter:
Begin marketing to assisted living facilities and senior associations
Introduce “take home” program
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4.2.
Budget for first year
Source of funds: managing partners’ contribution
$10,000
$ 5,000
$ 5,000
$ 5,000
Marketing literature
Website development
Document preparation
Information management
Total $25,000
Source of funds: cash flow from operations
$20,000
$25,000
$ 5,000
$20,000
$10,000
$ 5,000
Total $85,000
Accounting
Payroll administration
Training
Liability Insurance
Travel
Other operating expense
Source of funds: credit card payment processing
Merchant processing fees for credit card payments
Total $90,000
5.1.
Revenue Projections
Projections for revenue growth are based on the placement and activation of an additional 12 webcams in each time zone each month. Revenues include $25 registration for each new activation, with an average service fee of $30/day. In a 30 day month this adds $200/month in registration fees and $360/day in service fees for a total revenue increase of $10,800/month at each location.
5.2.
Break-even Analysis
In lieu of an operating break-even, since operating expenses are initially born by the managing partners, we are interested in the amount of service revenue required to adequately compensate our local business managers and virtual nurses. With a payout of 90% of revenues, the virtual nurse receives approximately $1.20 per hour for each patient that is being monitored. We cannot guarantee that every nurse will have 12 patients to monitor every day, but we will manage patient assignments to maximize nurse utilization and individual payout in the range of 12 to 16 patients per nurse.
Each of the three operating locations is assigned two shifts in an eight hour period of operation.
In a week, with two 4 hour shifts per day, there are 14 shifts with 56 hours to be covered. The local business manager can start the business and work as a virtual nurse for the first 12 to 16 patients, and will recruit virtual nurses to take over the patient monitoring while the business manager develops additional customers and revenue opportunities.
5.3.
Cash-flow Analysis
Cash-flow from the business is all generated from operations. There are no assets to be sold off, no borrowing projected and no sale of shares in the company for additional cash-flow.
5.4.
Operating Statement
The operating statement is based on revenue sharing, with 10% of revenues to be retained to cover operating expenses as the business grows.
5.5.
Balance Sheets
Revenues are all processed as credit card payments, creating accounts receivable for the three days it takes to settle transactions and collect the funds in our bank account. Inventory is webcam units purchased on 30 day terms, maintained to provide immediate placement of units
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for new activations and for replacement of any defective units. Cash is maintained as a cushion for working capital as needed. Goodwill is a plug figure to balance accounts.
Ongoing liabilities are accrued for payment of inventory and for the payout of revenues from the prior two weeks of activity. Shareholders’ net worth is calculated as previous period ending net worth plus 20% of current period net income, assuming that the balance of net income will be distributed to managing partners. See Appendix for detailed information
Revenue growth and operating expenses need to be reported and evaluated regularly to ensure that the business is growing as planned, or that based on our evaluation we identify and make corrections or implement adjustments to our plan to improve results.
Financial performance evaluation will be conducted weekly for current and prospective revenue performance and opportunities to identify trends of usage at existing customers and potential usage at new accounts from each business center. We need to collect data from each hospital on the number of units placed, the utilization rate, and the profile of who is using our service. This will help us better project revenue growth at existing locations, and provide us with better information to be shared with prospective customers as we expand our service base.
Marketing and website optimization expenses will be reviewed in relation to resulting usage of services, and adjusted to better target and support acquisition of “most likely” customers.
Financial condition will be evaluated monthly to identify variations in liquidity, leverage, and return on capital. Cash-flow projections will be updated and cash balances will be maintained in the business to cover current operating expenses and payment of current obligations including revenue payout and accounts payable.
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VIRTUAL CARE COMPANION – PRO FORMA FINANCIAL STATEMENTS – FIVE YEAR PROJECTION
Income Statement Year 1 Year 2 Year 3 Year 4 Year 5
Service Revenues $ 2,910,109 $ 5,820,218 $ 8,730,327 $ 11,640,436 $ 14,550,545
Less: Revenue payout $ (2,619,098) $ (5,238,196) $ (7,857,295) $ (10,476,393) $ (13,095,491)
Net Service Revenue $ 291,011 $ 582,022 $ 873,033 $ 1,164,044 $ 1,455,055
Operating expenses
Accounting
Legal
Marketing
Training
$ 20,000
$ 5,000
$ 25,000
$ 5,000
$ 22,000 $ 24,200 $ 26,620 $ 29,282
$ 5,500 $ 6,050 $ 6,655 $ 7,321
$ 27,500 $ 30,250 $ 33,275 $ 36,603
$ 5,500 $ 6,050 $ 6,655 $ 7,321
Payroll service
Insurance
Travel
Bank fees
Office supplies
Postage
Total operating expense
Net Income
$ 25,000
$ 18,000
$ 10,000
$ 91,011
$ 27,500 $ 30,250 $ 33,275 $ 36,603
$ 19,800 $ 21,780 $ 23,958 $ 26,354
$ 11,000 $ 12,100 $ 13,310 $ 14,641
$ 90,000 $ 99,000 $ 108,900 $ 119,790 $ 131,769
$ 1,500 $ 1,650 $ 1,815 $ 1,997 $ 2,196
$ 500 $ 550 $ 605
$ (200,000) $ (220,000) $ (242,000)
$ 666 $ 732
$ (266,200) $ (292,820)
$ 362,022 $ 631,033 $ 897,844 $ 1,162,235
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12
Balance Sheet
Cash
Account Receivable
Inventory
Current Assets
Office Equipment
Goodwill
Year 1 Year 2 Year 3 Year 4 Year 5
$ 50,000 $ 75,000 $ 150,000 $ 200,000 $ 250,000
$ 23,919 $ 47,837 $ 71,756 $ 95,675 $ 119,594
$ 3,240 $ 6,480 $ 9,720 $ 12,960 $ 16,200
$ 77,159 $ 129,317 $ 231,476 $ 308,635 $ 385,794
$ 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000
$ 8,681 $ 28,755 $ 2,631 $ 79,870 $ 209,987
Total Assets
Accounts Payable
$ 167,998
$ 1,620
$ 292,390 $ 470,583 $ 702,140 $ 986,574
$ 3,240 $ 4,860 $ 6,480 $ 8,100
Revenue to Distribute $ 50,367 $ 100,735 $ 151,102 $ 201,469 $ 251,836
Total Liabilities
Shareholder NW
= RATIOS =
Current Ratio
Days A/R
Debt/Worth
Working Capital
$ 51,987 $ 103,975 $ 155,962 $ 207,949 $ 259,936
$ 116,011 $ 188,415 $ 314,622 $ 494,191 $ 726,637
1.48
3.0
0.45
1.24
3.0
0.55
1.48
3.0
0.50
1.48
3.0
0.42
1.48
3.0
0.36
25,171

CASH FLOW STATEMENT
Cash at Beginning of Year
OPERATIONS
Cash receipts from customers
Cash paid for
Year 1 Year 2 Year 3
$ 25,000 $ 50,000 $ 75,000
$ 2,910,109 $ 5,820,218 $ 8,730,327
Revenue payout
General operating expenses
Net Cash Flow from Operations
$ (2,619,098) $ (5,238,196) $ (7,857,295)
$ (200,000) $ (220,000) $ (242,000)
$ 91,011 $ 362,022 $ 631,033
INVESTMENT ACTIVITY
Cash receipts from
Sale of property and equipment
Collection of principal on loans
$ - $ - $ -
$ - $ - $ -
Cash paid for
Sale of investment securities
Purchase of property & equipment
$ - $ - $ -
$ (5,000) $ - $ -
Making loans to other entities
Purchase of investment securities
Net Cash Flow from Investing Activities $ (5,000)
FINANCING ACTIVITY
$ - $ -
Cash receipts from
Issuance of stock
Borrowing
Cash paid for
Repurchase of stock (treasury stock)
Repayment of loans
$ - $ - $ -
$ - $ - $ -
Partners' Distribution $ (61,011) $ (337,022) $ (556,032)
Net Cash Flow from Financing Activities $ (61,011) $ (337,022) $ (556,032)
Net Increase (Decrease) in Cash
Cash at End of Year
$ 25,000 $ 25,000 $ 75,001
$ 50,000 $ 75,000 $ 150,000
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